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GE's Baker Hughes upbeat on 2019 as LNG demand grows

(Reuters) - Baker Hughes, General Electric Co’s oilfield services arm, gave an upbeat outlook for the year as its quarterly orders rose and sanctions of liquefied natural gas projects accelerated.

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Unlike rivals Schlumberger NV and Halliburton Co, Baker Hughes has less exposure to the North American pressure pumping sector, where demand has softened in recent months. Many oilfield service companies have also been hurt by the drop in oil prices at the end of last year.

Shares were up more than 5 percent in pre-market trading but pared those gains when the market opened, standing at $24.30, up 1.5 percent, at mid-morning.

Wall Street analysts called the results positive, pointing to over $1 billion in free cash flow from operations and the highest quarterly orders in roughly three years.

The company reported $6.9 billion in orders, up from $5.7 billion last year. Orders in its oilfield equipment business more than doubled from the prior year to over $1 billion.

“We think the market will continue to increasingly appreciate BHGE’s leverage to the improving offshore, international, and LNG markets and limited exposure to North America pressure pumping,” analysts for Evercore ISI wrote in a note after the results came out.

The company gave a positive outlook for its turbomachinery and process solutions business, which supplies turbines and compressors, pointing to an acceleration of liquefied natural gas project sanctions. In the fourth quarter, Baker Hughes secured an award to provide modular turbocompressor technology for LNG Canada’s project in Kitimat, British Columbia.

“The underlying market drivers are extremely positive for turbomachinery segment,” Baker Hughes Chief Executive Officer Lorenzo Simonelli said on Thursday. He estimated a potential 100 million tonnes per annum of LNG capacity could get the green light this year.

A record amount of liquefied natural gas (LNG) production is expected in 2019 amid strong global demand, especially from China, according to a Wood Mackenzie report from earlier this month.

Simonelli also said he expected lower oil prices to have an impact on U.S., Canadian and Latin American markets in the first half of 2019, while other international markets would remain relatively stable.

Last year marked Baker Hughes’ first full year combined with General Electric, which bought a stake in the services firm in 2017. In November, General Electric reduced its ownership from roughly 62.5 percent to 50.4 percent.

Baker Hughes said it has reached commercial agreements with General Electric to position its company for the future.

Revenue in Baker Hughes’ oilfield services business, which accounts for roughly half of total sales, rose 10 percent to $3.1 billion in the reported quarter.

The company reported an adjusted net income of $120 million, or 26 cents per share, in the fourth quarter ended Dec. 31, in line with analysts’ expectations. Last year, the company reported a fourth-quarter adjusted net income of $65 million, or 15 cents per share.

Reporting by John Benny in Bengaluru; Editing by Bernadette Baum and Sonya Hepinstall

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Editorial Comment
-Adrienne Blume
China is hosting the 19th International Conference and Exhibition on Liquefied Natural Gas (LNG2019) in Shanghai from 1–5 April—an appropriate choice of host country, given China’s increased appetite for natural gas.
EWAnalysis: Canada comes late to LNG; projects and prospects mixed
- Energy Web Atlas
Canada has abundant natural gas resources.
Executive Viewpoint: BHGE developing technology-driven solutions to reduce total cost of ownership
-Alberto Matucci
While BHGE recently won new orders for LNG projects, the company remains committed to differentiating the business, implementing solutions proven in LNG into other applications of the oil and gas value chain.
Industry Trends: Russia and US go head-to-head over EU gas market
-Eugene Gerden
Lower-cost Russian gas will likely continue to dominate the EU market in the coming years, despite the growth in oil prices, to which Russian gas prices are linked.

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